Counterfeiting: A South African Perspective

Counterfeiting and piracy can cause irreparable harm to a brand owner’s revenue and brand equity. What is more, even a country’s global image may suffer. Unfortunately, South Africa has not escaped the effects of 21st Century brand name buccaneering and in a recent global counterfeit and piracy report, this country was rated 16th among the top 20 nations, reporting Intellectual Property violations with losses equating to approximately US$21 million. In 2005 alone, brand owners worldwide suffered losses of more than US$154 billion.

Recent statistics issued by the Department of Customs and Excise (a division of South African Revenue Services) for the period 1 April 2005 to 28 February 2006, revealed that counterfeit goods to the value of R428,402,912.35 were detained. The detained goods included, inter alia, cigarettes, DVD’s and CD’s, clothing and footwear, cell phone accessories and perfume. With these statistics, it should come as no surprise that dealing in counterfeit goods is said to account for 5 to 7% of world trade.

In South Africa, however, there is a glow at the end of this gloomy tunnel. This comes in the form of the Counterfeit Goods Act 37 of 1997 (hereafter referred to as “the Act”), which is arguably the most sophisticated and effective anti-counterfeiting legislation in the world. Counterfeiting of trade marks has, historically and imperfectly, been dealt with by different Merchandise Marks Acts. Piracy, which concerns copyright infringement committed knowingly, was criminalized by the Copyright Act and this is still the case. International concern about counterfeiting and piracy is reflected in certain provisions of the Agreement on Trade-Related Aspects of Intellectual Property Rights, better known as TRIPS. The preamble to TRIPS speaks of the desire of member States

“to reduce the distortions and impediments to international trade, and taking into account the need to promote effective and adequate protection of intellectual property rights, to ensure that measures and procedures to enforce intellectual property rights do not themselves become barriers to legitimate trade”.

The Act was created as a result of South Africa’s obligation to the TRIPS agreement and certain pitfalls notwithstanding, it is a user friendly and effective piece of legislation.

Effective border control is the first step towards cracking down on the trade in counterfeit goods in South Africa. Section 15 of the Act deals with the powers of the Department of Customs and Excise in relation to counterfeit goods being imported into the Republic. Having implemented its policy for the administration of this section of the Act on 15 September 2003, the Department of Customs and Excise has been effective and pro-active in its fight against the importation of counterfeit goods into South Africa. The statistics issued by the Department of Customs and Excise, which were referred to earlier in this article, bear testimony to this. However, it is important to note that the Commissioner for Customs and Excise will only assist the owners of Intellectual Property rights to detect and detain suspected counterfeit goods if an application referred to in Section 15 has been filed and accepted by the Commissioner. Owners of Intellectual Property rights are encouraged to offer brand identification training to Customs officials to enable them to identify suspected counterfeit goods. No doubt this will result in the anti-counterfeiting program achieving greater success.

In the event that counterfeit goods enter the Republic without being detected by Customs, the Act also makes provision for enforcement in the market place. Any person who:

  • has an interest in the protected goods, whether as the owner or licensee of an intellectual property right in respect of the protected goods, or
  • as an importer, exporter, or distributor thereof (including the duly authorised agent or representative or the attorney of any such person), and
  • who reasonably suspects that an offence referred to in Section 2(2) of the Act has been committed or is likely to be committed by any person, may lay a complaint with a designated inspector. The South African Police Service and the Department of Trade and Industry have created specialized units to assist the owners of Intellectual Property rights with anti-counterfeiting law enforcement. Thanks to the dedication and commitment shown by the officials of these departments, numerous offenders have been convicted of dealing in counterfeit goods. This has indeed sent a strong message to the market place that dealing in counterfeit goods is regarded as a serious offence and that perpetrators will be prosecuted.

The Act provides the Customs inspectors with a wide range of powers and could therefore be construed as being draconian, but there are certain checks and balances to ensure that this statute is not abused. The complaint referred to above, which can be used in support of an application for a search and seizure warrant, must contain certain key information and particulars. These include, inter alia, evidence that the goods with reference to which the offence has been or, is likely to be committed, are prima facie counterfeit goods. The complainant must also provide evidence as to the subsistence and extent of the Intellectual Property right that would be infringed by the goods alleged to be counterfeit. Since this application for a search and seizure warrant is ex parte (meaning “with respect to or in the interests of one side only”), the complainant is required to disclose all material facts that may influence a presiding officer when issuing a warrant. It would appear that the legislature anticipated that it was granting intrusive remedies to the proprietor or licensee of the Intellectual Property rights and that any application for such remedies must be justifiable in terms of the constitution.

Provided that the complaint satisfies the requirements of the Act, it can be used by a designated inspector to apply for a search and seizure warrant in terms of Section 6 of the Act. Such a warrant may be issued by a High Court judge in chambers or a magistrate within the area of jurisdiction where the offence is committed. Having obtained the search and seizure warrant, the search and seizure operation is conducted in a manner that ensures that the constitutional rights of the person from whom the goods are seized are not violated. The seized counterfeit goods will thereafter be transported and stored at a designated counterfeit goods depot and will remain in storage until the matter is finalised.

Departing from the legal issues for the moment, Intellectual Property right owners are encouraged to educate the public of the dangers and risks associated with counterfeit goods. This goes back to the well established principle of supply and demand: if there is no demand by consumers to purchase counterfeit goods, the supply chain for counterfeit goods will be broken.

South Africa will be the highlight and focus of the global community during the FIFA 2010 World Cup. It would indeed be unfortunate if counterfeiters were to be allowed to harm this great country’s global image.

Date published: 2008/08/01
Author: Spoor & Fisher

Tags: counterfeiting south africa piracy